Capacity building spurs upstream spending

27 April 2023

 

The Middle East and North Africa (Mena) region, where a third of the world’s crude oil and about a quarter of its natural gas is produced, is increasing its hydrocarbons production potential.

There are an estimated $113.6bn-worth of upstream oil and gas projects in the engineering, procurement and construction (EPC) execution stage in the Mena region, according to data from regional projects tracker MEED Projects. 

Most of these schemes are set to be commissioned between this year and 2025, helping the region to consolidate its position as the largest producer of crude oil, natural gas and liquefied natural gas (LNG).

With the world still heavily reliant on hydrocarbons, and green energy sources falling short of meeting global energy needs, oil and gas producers in the region see more merit in investing in building upstream production potential.

Regional oil and gas industry leaders have been making the case for increasing spending on boosting hydrocarbons output capacity. Their purpose has been to draw the world’s attention to the role of fossil fuels as a bridge to achieving a clean energy transition, as well as to justify their major upstream capital expenditure (capex) programmes.

Saudi Arabia dominates

Saudi Aramco tops MEED’s ranking of state energy enterprises in the Mena region by the volume of upstream oil and gas projects under EPC execution, with nearly $41bn-worth of project value.

Aramco aims to increase its maximum oil output spare capacity to 13 million barrels a day (b/d) by 2027 from about 12 million b/d currently. It also plans to raise gas production by 50 per cent by the end of this decade. 

With a large portion of its under-execution projects expected to come online by the middle of this decade, the Saudi energy giant appears to be on track to meet its strategic output goals.

The largest Saudi Aramco project under execution is the $3bn-plus Berri increment programme, which was awarded to Italian contractor Saipem in July 2019. Through the project, Aramco plans to add 250,000 b/d of Arabian light crude from the offshore oil and gas field.

The planned facilities will include a new gas oil separation plant (GOSP) on Abu Ali Island to process 500,000 b/d of Arabian light crude and additional processing facilities at the Khursaniyah gas plant to process 40,000 b/d of associated hydrocarbons condensates.

The Berri increment programme will complement Saudi Aramco’s $15bn Marjan field development programme, EPC contracts for which were also awarded in July 2019. The scheme is an integrated project for oil, associated gas, non-associated gas and cap gas from the Marjan offshore oil and gas field.

The Marjan development plan includes provision of a new offshore GOSP and 24 offshore oil, gas and water injection platforms. The contract for the main GOSP, which is worth $3bn and is the first EPC package of the project, was awarded to McDermott International. The US contractor also won offshore package four, which involves the building of offshore gas facilities and is valued at about $1.5bn.

The offshore development project aims to increase the production of the Marjan field by 300,000 b/d of Arabian medium crude oil, process 2.5 billion cubic feet a day (cf/d) of gas and produce an additional 360,000 b/d of ethane and natural gas liquids.

Looking ahead, Aramco expects capital expenditure in 2023 to be $45bn-$55bn, including external investments. This projected spending is at least 20 per cent higher than the company’s $37.6bn capex in 2022.

Qatar’s LNG expansion

With the goal of consolidating its position as the world’s largest supplier of gas, QatarEnergy continues to progress with its North Field LNG expansion programme. The project, which is estimated to be worth about $30bn, will increase Qatar’s LNG production to 126 million tonnes a year (t/y) in two phases by 2027.

The two-stage North Field Production Sustainability (NFPS) programme will run in parallel, to help maintain gas production from the offshore reserve in order to match the feedstock requirements of the LNG expansion scheme.

QatarEnergy led spending on upstream projects in 2022 for the second year in a row, accounting for more than a third of the $18.9bn EPC contract awards in the Mena region. The firm’s overall value of EPC projects under execution stands at $27.3bn, putting it in second place in MEED’s ranking of the biggest national oil companies by volume of under-execution projects.

Launched in 2017, the North Field East (NFE) project constitutes the first phase of QatarEnergy’s North Field LNG expansion project. As well as an LNG output of 32 million t/y, NFE will produce 4,000 tonnes a day (t/d) of ethane as feedstock for future petrochemicals developments, 260,000 b/d of condensates, 11,000 t/d of liquefied petroleum gas (LPG) and 20 t/d of helium.

The EPC works on QatarEnergy’s NFE project were divided into six packages – four onshore and two offshore – and are currently progressing. 

QatarEnergy awarded a $13bn contract for NFE package one to a consortium of Chiyoda and TechnipEnergies in February 2021. The package covers the EPC of four LNG trains, each planned to have an output capacity of about 8 million t/y. 

QatarEnergy’s largest award in 2022 was a $4.5bn EPC contract that was won by Saipem for the building and installation of two gas compression facilities as part of the second development phase of its NFPS project. The gas compression complexes covered in the package known as EPCI 2 will weigh 62,000 tonnes and 63,000 tonnes and will be the largest fixed steel jacket compression platforms ever built.

Abu Dhabi ambitions

Abu Dhabi National Oil Company (Adnoc) adopted a five-year business plan in November last year that covers a capex budget of $150bn for 2023-27. The budget also sets the target of achieving its oil production capacity goal of 5 million b/d by 2027 rather than 2030.

The oil production increment projects that it has under execution are expected to play a key role in enabling the Abu Dhabi major to attain its accelerated oil capacity target.

The largest of Adnoc’s under execution projects is a $1.4bn EPC contract awarded to Spanish contractor Tecnicas Reunidas in late 2018 for upgrading the Bu Hasa onshore oil field development. Through this project, Adnoc plans to increase the Bu Hasa field’s production from 500,000 b/d to 650,000 b/d. 

On the gas production front – a core priority for Adnoc – $1.5bn-worth of EPC contracts were awarded to Abu Dhabi’s National Petroleum Construction Company (NPCC) and Tecnicas Reunidas in November 2021 for the offshore and onshore packages, respectively, of the Dalma sour gas field development project.

When completed in 2025, the project will enable the Dalma field to produce about 340 million cf/d of natural gas.

The Abu Dhabi energy giant further intends to raise its total gas output by 3 billion cf/d in the next few years. The Hail and Ghasha offshore sour gas production project will be central to achieving this goal.

In January, Adnoc signed pre-construction services agreements (PCSAs) with France-headquartered Technip Energies, South Korean contractor Samsung Engineering and Italy’s Tecnimont for the Hail and Ghasha onshore package. Saipem, NPCC and state-owned China Petroleum Engineering & Construction Company secured a PCSA for the offshore package.

While the onshore and offshore PCSAs awarded to the two consortiums by Adnoc are valued at $80m and $60m, respectively, the EPC packages are estimated to be worth $5.5bn and $5bn.

As part of the PCSAs, the contractors are required to perform initial detailed engineering and procurement for important long-lead items. 

Based on proposals to be submitted later this year, Adnoc is expected to award the same contractors the contracts for the main EPC works on the Hail and Ghasha project.

Production from the Ghasha concession, where the Dalma and Hail and Ghasha fields are located, is expected to start in 2025, ramping up to more than 1.5 billion cf/d before the end of this decade. 


Main image: Saudi Aramco tops the ranking of state energy enterprises in the Mena region with almost $41bn-worth of projects under execution. Credit: Aramco

https://image.digitalinsightresearch.in/uploads/NewsArticle/10791190/main.gif
Indrajit Sen
Related Articles
  • SWCC receives bids for four desalination plants

    21 May 2024

    Saudi Arabia's main producer of desalinated water, Saline Water Conversion Company (SWCC), has received bids for four seawater reverse osmosis (SWRO) desalination plants with a total combined capacity of around 2 million cubic metres a day (cm/d)

    According to an industry source, bids were submitted on 14 May for the Yanbu SWRO project, which has a baseline capacity of 300,000 cm/d.

    Bids were submitted five days later for three SWRO facilities. The tendered projects and their water desalination capacities are:

    • Shuaiba 6 SWRO: 545,000 (cm/d)
    • Ras Al Khair SWRO: 600,000 cm/d
    • Jubail SWRO: 600,000 cm/d

    The four contracts are being procured using an engineering, procurement and construction (EPC) model, in contrast to the SWRO facilities being procured on a public-private partnership (PPP) basis by the state offtaker, Saudi Water Partnership Company (SWPC).

    SWCC has tendered the contract to build the Shuaiba 6 SWRO before.

    It was most recently tendered in 2022, with a team comprising the local firms Wetico and Alfanar, and Italy's Fisia Italimpianti submitting bids for the contract on 26 March.

    SWCC is the world's largest producer of desalinated water with a capacity of at least 6.6 million cm/d. Plants utilising older and energy-intensive techniques such as multi-stage flash technology (MSF) account for the majority of its current capacity.

    According to MEED Projects data, SWCC has awarded several SWRO plants in the past few years, including:

    • Ras Al Khair production system expansion: 200,000 cm/d
    • Jubail SWRO plant: 1,000,000 cm/d
    • Shuqaiq 1 SWRO plant: 400,000 cm/d.
    https://image.digitalinsightresearch.in/uploads/NewsArticle/11796584/main.gif
    Jennifer Aguinaldo
  • Ambitious projects rebrand engineering

    20 May 2024

     

    Over the past two decades, the Middle East has undergone a significant transformation driven by rapid urbanisation, economic diversification and geopolitical dynamics. The region has emerged as a global hub for trade, investment and innovation, with infrastructure playing a central role in facilitating this growth.

    According to Pierre Santoni, president of Europe, Middle East and Africa for Parsons Corporation, ongoing infrastructure investment has created a market that continues to offer strong growth opportunities for the construction industry.

    “Parsons is one of the oldest firms operating in the Middle East, which is a growing and well-funded market, with a team that is executing at a high level and our company has continued to make investments to drive growth in the business,” he says.

    “We had an outstanding fourth quarter and full year in 2023 with record results for total revenue, organic revenue growth, adjusted Ebitda and operating cash flow, as well as major contract awards in countries such as Saudi Arabia, the UAE and Qatar.”

    Changing focus

    The region’s transformation has led to an adjustment in priorities as pressure on existing infrastructure mounts, he notes.

    In the UAE, the focus in the early 2000s was primarily on developing landmarks and megaprojects that showcased the region’s ambition and prosperity. This era saw the construction of iconic structures such as the Palm Jumeirah, Burj Khalifa and, more recently, Etihad Rail, symbolising the country’s aggressive development plans.

    Over recent years, there has been a shift towards more sustainable and resilient infrastructure development, with the UAE government prioritising investments in transportation, utilities and smart city initiatives to enhance residents' quality of life and improve mobility and infrastructure.

    “The demographic trends, including rapid population growth and urbanisation, are placing strain on existing infrastructure networks, necessitating investments in expansion and modernisation,” says Santoni.

    Robust infrastructure is required to support the regional government’s economic diversification efforts, which are driving investment and growth in sectors such as tourism, technology and renewable energy. This includes the development of new highways, ports and transportation systems to facilitate trade and tourism.

    “The UAE has outlined a stable investment programme that includes the development of large transportation and construction schemes,” says Santoni. “We are working with the Abu Dhabi government on Plan Capital 2040 and it promises tremendous growth opportunities for Parsons.”

    Dubai also offers opportunities for growth due to the property market boom and the government’s plans for new infrastructure projects. 

    “Government spending in Dubai has accelerated post-Covid. There is a renewed optimism in the market through large-scale infrastructure projects and major real estate schemes,” Santoni adds.

    “Parsons is working closely with some of the major real estate developers in Dubai, such as Emaar and Dubai Properties.”

    Santoni says that although the market has a strong pipeline of upcoming projects, there will also be a focus on improving the infrastructure that already exists.

    “There is a lot of focus on improving the existing infrastructure; hence, we have added operations and maintenance services into our portfolio.”

    Beyond the UAE

    The UAE is just part of Parsons’ work in the GCC. It also has a significant presence elsewhere in the GCC, including Saudi Arabia and Qatar. The company has been operating in Saudi Arabia for over 65 years and is working on a wide range of major programmes in the country, including The Line at Neom, Riyadh Sports Boulevard, King Salman International Park and Diriyah Gate, among others.

    Santoni says, “Saudi Arabia is the fastest growing market globally and is a key market for us. The Vision 2030 projects are a driving force for much of our business in the kingdom and we expect robust growth in coming years.”

    “We are investing significantly in enhancing our engineering capabilities catering to the Saudi market,” he adds.

    The firm has also played a key role in delivering major infrastructure development schemes in Qatar, including for the 2022 World Cup. After a strong decade during the build-up to the event, Parsons worked on several other major schemes in the country, such as the Doha Metro, Qatar Rail, Seef Lusail, Hamad International airport expansion and Pearl Qatar.

    Santoni expects Qatar’s growth to be more reserved over the next few years as the country develops a new long-term strategic development plan.

    Attracting talent

    With so many projects proceeding, the challenge for engineering companies such as Parsons is attracting talent.

    “We have done a lot over the years to make Parsons an employer of choice for Saudi and UAE nationals, and we’re making significant investments in training and retention programmes to continue offering outstanding career opportunities,” says Santoni.

    Construction now has to compete with other industries such as technology and IT, which are often considered more exciting places to work. 

    Santoni says that this may change in the future as the world realises that there is an infrastructure gap that needs bridging with new and exciting projects, especially in the Middle East region. 

    “Many people have left the industry over the past few decades, but with the planned infrastructure projects, engineering is starting to look cool again.”

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11793674/main.gif
    Yasir Iqbal
  • UAE forms EV joint venture

    20 May 2024

    Two government entities in the UAE have formed a company, UAEV, to develop electric vehicle (EV) charging infrastructure across the country.

    The joint venture aims to provide fast and affordable charging infrastructure, said Sharif Salim Al Olama, undersecretary for energy and petroleum affairs at the of Energy & Infrastructure Ministry.

    Al Olama is chairman of the newly formed joint venture.

    Etihad Water & Electricity (Etihad WE), the partner for the joint venture, provides utility services in the UAE's northern emirates.

    Etihad WE CEO Yousif Ahmed Al Ali is a board member of UAEV.

    "Our intention is for the first UAEV charging points to be operational this year," said Al Olama during the launch of the company at the ongoing Electric Vehicle Innovation Summit in Abu Dhabi.

    MEED understands the company aims to install 100 EV chargers across the UAE by the end of the year, starting in the Northern Emirates of Ajman, Ras Al Khaimah, Umm Al Quwain, Fujairah and Sharjah.

    UAEV also plans to invest in similar infrastructure in Dubai and Abu Dhabi.

    It expects to roll out 1,000 charging stations by 2030.

    The company aims to set up several tiers of EV charging stations.

    The initial tier caters to locations such as mosques and supermarkets, while another set of chargers will be installed in parking areas and on streets to ensure that drivers can top up their batteries whenever necessary.

    UAEV also aims to build what it calls "EV hubs", catering to cities and larger communities with wider services.

    UAEV will use fast and ultra-fast charging solutions to accelerate EV adoption. "We will provide advanced charging options to make EV ownership more appealing," said Al Ali.

    The initial phase of the infrastructure rollout will cater to passenger vehicles.

    Plans could extend the services to commercial vehicles and maritime fleets, as well as potentially providing hydrogen fuel to trucks and other types of fleet.

    Al Olama confirmed that discussions are under way to unify EV charging tariffs between the emirates.

    "This partnership is part of a clear mandate to deliver green mobility. There is a great potential and need from end-users," Al Olama said. "It is also an important step to help meet the UAE net-zero target by 2050."


    MEED's April 2024 special report on the UAE includes:

    > COMMENT: UAE rides high on non-oil boom
    > GVT & ECONOMY: Non-oil activity underpins UAE economy

    > BANKING: UAE banks seize the moment
    > UPSTREAM: Adnoc oil and gas project spending sees steep uptick
    > DOWNSTREAM: UAE builds its downstream and chemical sectors

    > POWER: UAE marks successful power project deliveries
    > WATER: Dubai tunnels project dominates UAE pipeline
    > DUBAI CONSTRUCTION: Dubai real estate boosts construction sector

    > ABU DHABI CONSTRUCTION: Abu Dhabi makes major construction investments

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11792353/main4504.jpg
    Jennifer Aguinaldo
  • WTTCO conducts Ras Mohaisen pipeline study

    20 May 2024

     

    State-backed Water Transmission & Technologies Company (WTTCO) is undertaking a feasibility study for the preferred procurement model and project structure for the contract to build or develop Saudi Arabia's water transmission pipeline project linking Ras Mohaisen, Al Baha and Mecca.

    The responsibility to procure the project has been transferred from Saudi Water Partnership Company (SWPC), which planned to implement the project on a build, own, operate and transfer (BOOT) basis, to WTTCO.

    The final procurement model for the scheme will be decided once the feasibility project is completed, according to a source close to the project.

    The 300-kilometre water transmission scheme linking Ras Mohaisen, Al Baha and Mecca will have the capacity to transmit up to 400,000 cubic metres a day (cm/d) of water.

    In February 2022, SWPC prequalified the following 13 companies for the contract to develop the project:

    • Abdul Aziz Al Ajlan Sons Company for Commercial & Real Estate Investment (local)
    • Abu Dhabi National Energy Company (Taqa, UAE)
    • Al Bawani Water & Power (local)
    • Al Yamama Company (local)
    • China Gezhouba Group Overseas Investment Company (China)
    • China Harbour Engineering Company
    • Cobra Instalaciones y Servicios (Spain)
    • Gulf Investment Corporation (Kuwait)
    • Marubeni Corporation (Japan)
    • Mutlaq Al Ghowairi Company (local)
    • Mowah Company (local)
    • Utico (UAE)
    • Vision International Invest Company (local)

    The project aligns with the kingdom's National Water Strategy 2030, which aims to reduce the water demand-supply gap and have desalinated water account for 90% of the national urban supply to reduce reliance on non-renewable ground sources.

    The transaction advisory team for the first four independent water transmission pipeline projects in Saudi Arabia, which previously included the Ras Mohaisen project, comprised India's Synergy Consulting as financial adviser and the local Amer Al Amr and Germany's Fichtner Consulting as legal and technical advisers, respectively.


    MEED's April 2024 special report on Saudi Arabia includes:

    > GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
    > BANKING: Saudi lenders gear up for corporate growth
    > UPSTREAM: Aramco spending drawdown to jolt oil projects
    > DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector

    > POWER: Riyadh to sustain power spending
    > WATER: Growth inevitable for the Saudi water sector
    > CONSTRUCTION: Saudi gigaprojects propel construction sector
    > TRANSPORT: Saudi Arabia’s transport sector offers prospects

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11791400/main.jpg
    Jennifer Aguinaldo
  • UAE plans nationwide EV charging network

    20 May 2024

    The UAE plans to increase electric vehicle (EV) adoption through the installation of a robust charging network linking the seven emirates.

    "The government is collaborating with private sector partners to make this plan a reality," said Sharif Salim Al Olama, undersecretary for energy and petroleum affairs at the Energy & Infrastructure Ministry, at the ongoing Electric Vehicle Innovation Summit in Abu Dhabi.

    There is also a plan to install EV chargers at the UAE's border with Saudi Arabia. “We aim to increase the scale and adoption by raising EV share [of cars on the UAE road] to 50% by 2050,” Al Olama said.

    “Achieving this target requires investment in infrastructure, collaboration with all stakeholders in the supply chain, and adopting and promoting innovation.”

    The government executive highlighted that greener mobility is crucial to the UAE's net-zero carbon emissions target by 2050.

    "Our all-inclusive decarbonisation drive includes the adoption and promotion of green mobility, with transport being one of the biggest global greenhouse gas emitters," said Al Olama.

    Photo: Lucid car model on display at Evis 2024

    Related read: Electric vehicles have a long way to go


    MEED's April 2024 special report on the UAE includes:

    > COMMENT: UAE rides high on non-oil boom
    > GVT & ECONOMY: Non-oil activity underpins UAE economy

    > BANKING: UAE banks seize the moment
    > UPSTREAM: Adnoc oil and gas project spending sees steep uptick
    > DOWNSTREAM: UAE builds its downstream and chemical sectors

    > POWER: UAE marks successful power project deliveries
    > WATER: Dubai tunnels project dominates UAE pipeline
    > DUBAI CONSTRUCTION: Dubai real estate boosts construction sector

    > ABU DHABI CONSTRUCTION: Abu Dhabi makes major construction investments

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11791023/main.jpg
    Jennifer Aguinaldo